What Happens if You Want to Back out of an Offer or Purchase Agreement? - Canada
In this article, the author will be discussing what happens if you change your mind after signing an offer or purchase agreement.
Please note that the information provided herein is not legal advice and is provided for informational and educational purposes only. If you need legal advice with respect to your offer or agreement of purchase and sale (or wanting to back out of one) you should seek professional "http://www.dynamiclawyers.com">legal assistance.
In this article, I’ll be discussing what happens if you change your mind after signing an offer or purchase agreement.
Once an offer or counteroffer has been made, it cannot be withdrawn unless there is a time limit on the offer or counteroffer which passes without being accepted.
An Agreement of Purchase and Sale may also be terminated if it becomes impossible to perform through no fault of either party (lawyers say such a contract is “frustrated”). An example is property destroyed in a flood or a fire before the buyer has taken possession.
If there is no relevant termination clause in the Agreement of Purchase and Sale, a party cannot claim frustration if the supervening event resulted from a voluntary act of the buyer or seller. Furthermore, frustration is not available if the parties contemplated the possibility of the supervening event arising during the term of the agreement and provided for in the agreement. In Dinicola v. Huang & Danczkay Properties, 2 R.P.R. (3d) 267, a condominium developer failed to develop 3 buildings and returned all deposits and down payments. The condominium unit purchasers, however, sued for breach of contract. In its defense, the developer argued that the municipal council’s refusal to approve the site plan for the development of the buildings frustrated its agreements with the purchasers. The Ontario Court of Justice (General Division) rejected that defense and found the developer liable to pay damages assessed at $4.9-million. The court reasoned that frustration was not available as a defense because the developer and the purchasers had contemplated the possibility of the municipal council’s refusal at the time the purchase and sale agreements were entered into. That possibility was also provided for in the agreements. Frustration was also not available because the developer relied on its own refusal to negotiate terms of the approval with the municipality to excuse itself from liability under the agreements.
Purchasers of new condominium units in Ontario have a cooling-off period of 10 days to back out of their purchase agreements.
Once the offer or counteroffer has been formally accepted, the buyer and seller are bound legally by its terms. If you walk away from a deal you may not only lose your deposit, but may also be liable for any damages suffered by the other party, such as the lost opportunity to sell to someone else, expenses arising from a delayed move, or the seller’s loss of deposit on another home intended for purchase. The legal remedy, called “specific performance” (making you complete the purchase), is an unlikely event, but a court could still hold you responsible for the entire purchase price, plus expenses and court costs.
ABOUT THE AUTHOR: Michael Carabash, B.A., LL.B., M.B.A.
Dynamic Lawyers Ltd. was founded by Michael Carabash, a Toronto business lawyer with Carabash Law. Virtually everyone has a wide range of legal issues they need help with - such as writing a will, fighting a traffic ticket, buying or selling real estate, writing a contract for services, reviewing a lease agreement, having documents notarized or commissioned, dealing with a motor vehicle accident, etc. Michael wanted ordinary people in need of common legal services to be able to conveniently and cost-effectively get answers and quotes from local lawyers. At the same time, he also wanted lawyers to be able to market their services directly and effectively to the public.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.